When should you shop your rates?

December 11, 2017

Shopping around to find the best price is what most of us do every day. Whether we’re buying groceries for the family or buying a new car, our budget-conscious selves are almost always looking for the best value for our money.

But when it comes to your employee group benefits plan, is shopping your rates the most effective way to pay less?

The answer isn’t a straightforward yes or no. Shopping your plan has its advantages, but only if you do so for the right reasons. Changing carriers is a labour-intensive process and an administrative burden, so it’s only advantageous when it’s done at the right time.

Review renewal offer carefully

Before considering switching carriers, review your current benefits plan and renewal offer with your benefits broker. Claims should ultimately dictate your health and dental premiums (life insurance and disability insurance premiums are typically demographically priced).  So, if the math that makes up your rates adds up, you’re likely getting a fair and accurate price. Shopping this rate for the sake of shopping it is most likely a fruitless exercise. Even if you’re offered a slightly better rate through another carrier, it likely wouldn’t be a significant enough difference over two years to justify the additional administrative expenses that come with packing up everything and re-enrolling all of your employees in a new plan.

But, if the math doesn’t make sense to you, then it’s time to discuss your options with your benefits broker. Your benefits broker is responsible for mitigating risk and controlling your costs in both the short and long term, while also providing unbiased views on employee health and wellness solutions.

Three options at renewal

1) Stay for another year. It’s important to understand that decisions of this magnitude are best made with more than one year’s worth of claim history in your pocket. Benefit carriers base their premiums not just on the current year but also on your claim history in order to make future claim projections.

Sticking around long-term builds plan stability and loyalty that you can then leverage in future years. And, it is the best way to assess real cost if you can see it break-even over 3 to 5 years.

2) Shop around. When the math truly doesn’t make sense to you or your broker, there is value in testing the competitiveness of your renewal rates. But it’s important to work closely with your benefits broker to ensure the quotes you receive compare apples to apples — with full transparency of the variables that will affect future renewals (trend, reserves, pooling, commissions, administration expense margin, etc.). Because a lower rate may not be exactly what it seems.

Think of it this way — if you are a Rogers subscriber and you think you pay too much for internet and cable, you may consider switching to Bell because its advertised rate for the same services appears significantly cheaper. The introductory rate offer may be cheaper, but in order to make a fair and educated decision, you need to know the long-term rate.

Benefit carriers often offer similar incentives when preparing a quote. And just like the Rogers and Bell game, switching carriers based on an incentive rate does not take into account the big picture and may not put your company further ahead in the long-term.

3) Price match.  While using another carrier’s rates to negotiate may seem like an effective technique, it’s not. If you wish to negotiate with your current carrier, do so based on the math and your claim history, not based on the ‘introductory offer’ from another carrier. Doing so creates volatility instead of stability and employers who shop around too frequently are viewed as insecure clients and a poor investment of resources. In other words, it will only hurt your relationship rather than help it.  As well, if you use other carriers’ rates as your leverage, what happens in those years when you don’t shop around?  Not a good year-to-year approach.

The right solution for one business isn’t necessarily the right solution for your business. So be wary of lower costs that may come at the expense of your employees’ satisfaction with the plan.

Contributed by Deborah Evans
Partner at Thorpe

For more information about Deborah or Thorpe Benefits click on this logo

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